Sept. 14 (Bloomberg) -- A U.S. appeals court was asked to
reinstate a Federal Election Commission rule that allowed
nonprofit groups running “issue ads,” such as the U.S. Chamber
of Commerce and Crossroads GPS, to keep their donors secret.

A three-judge panel of the U.S. Court of Appeals in
Washington heard arguments today from the Center for Individual
Freedom and the Hispanic Leadership Fund, urging reversal of a
decision by a lower court judge requiring disclosure of donor
names, saying it has hurt political speech in an election year.

“Did Congress clearly and unambigously intend to compel
the Federal Election Commission to require corporations and
labor unions to make much broader and more burdensome
disclosures?” Thomas Kirby, a lawyer for the Center for
Individual Freedom, said during today’s argument.

U.S. District Judge Amy Berman Jackson on March 30 voided
FEC regulations adopted in 2007 that let organizations and
nonprofit groups keep secret the names of donors who pay for
pre-election issue ads. She said the regulations clashed with
requirements of the 2002 campaign finance law known as McCain-Feingold that groups report their ad spending to the commission.

The FEC, which didn’t appeal the ruling, said in July that
groups should report donors of $1,000 or more retroactively
effective March 30.

‘Electioneering Communications’

The disclosure rules apply only to what are known as
“electioneering communications,” ads that run before an
election and mention a federal candidate without urging viewers
to vote for or against the person. So-called independent
expenditures, which advocate support or opposition to a
candidate, aren’t affected by the FEC decision.

At the time the 2002 law was written, independent
expenditures could only be paid for by disclosed contributions,
a restriction invalidated by the Supreme Court’s Citizens United
decision. Nonprofit groups said they would start funding
independent expenditures in order to avoid disclosure.

The case was brought by Representative Chris Van Hollen, a
Maryland Democrat, who argued that the campaign-finance law
required such disclosure.

One of the judges considering the appeal called the case
“weird” and said he doubted the groups have authority to bring
the appeal since the FEC didn’t pursue one.

Missing Agency

“The agency is not here to defend it so I don’t see what
redress you have,” U.S. Circuit Judge Harry Edwards, appointed
to the bench by President Jimmy Carter, said.

Circuit Judge A. Raymond Randolph said the interpretation
of federal election law arguing for the disclosure “makes no
sense.”

Randolph, appointed to the court by President George H.W.
Bush, said he was troubled that someone advocating for the
election or defeat of a particular candidate must only disclose
contributions for that specific advocacy while a company or
labor union advertisement that doesn’t urge viewers to vote a
certain way must “disclose the kitchen sink.”

Circuit Judge Janice Rogers Brown, a President George W.
Bush appointee, asked no questions during the argument.

Americans for Prosperity, which has ties to energy
executives Charles and David Koch; Crossroads GPS, the nonprofit
group founded with help from Republican strategist Karl Rove,
and the Chamber, the largest U.S. business lobby, have spent
millions of dollars to help elect Republicans without
identifying the sources of their money.

Americans for Prosperity has spent $30.9 million on the
2012 elections, while the Chamber has spent $11.3 million and
Crossroads GPS has spent 5.4 million, according to the Center
for Responsive Politics, a Washington-based research group that
tracks campaign spending.

The lower court case is Van Hollen v. Federal Election
Commission, 11-0766, U.S. District Court, District of Columbia
(Washington). The appellate cases are Van Hollen v. Federal
Election Commission, 12-5117 and 12-5118, in the U.S. Court of
Appeals for the District of Columbia Circuit (Washington).